Product and Service
Companies, who has been grouped in Fish meal and fish oil sector of food industry, are fishing companies focusing on fish meal and oil production.
Demand for Product and Service
Demands for fish meal/oil as animal nutrition products have been flat/declining and the demands in this sector is solely related with global demands for animal feeding products but limited by the competition from alternative animal meals.
The Sector
Sector’s current, trend, causes behind trend, and future
Current and Trend
- Demands for fish meal/oil as animal nutrition has been volatile but generally on a downturning road based on the sales volume data since 2004.
- As demands declines, the average sales price shrinks in the recent years as well.
- Companies in this sector are facing increasingly difficulties in keep the consistency for their margins and profitability in an environment where there are volatile demands and declining sales price.
Causes behind the trend
- The growing demands for meat protein sets the tone for the growth in demands for fish meal and fish oil as nutrition products for animal feeding.
- While the total demands for meat protein and thus animal feeding nutrition increase the demands for fish meal and fish oil have been offset by increasing competition from alternative animal nutrition products such as soybeans.
- The recent volatile of demands for fish meal and fish oil may be a result of lowered purchasing costs of fish meal and oil or of increasing costs for alternative nutrition.
- Plunging sales price in the past years may be a reflection of pressure on sales resulted from gradual declining demands.
Industry Future
Since the driving power for the growth in this sector comes from demands for animal nutrition from animal feeding industry and may be offset by the price competition among alternative animal nutrition products, we think this downturning trend will probably continue unless there is a sudden large increase in demands for meat protein and thus for feeding nutrition products or the alternative nutrition products such as corn and soybean lose their price edge.
Numbers
General Financial Performance of Companies In the Sector
Fishing for fish meal and oil has been growing slower than the whole food industry and most companies have experienced negative growth in terms of both sales volume and average sale price. Its sale volume fluctuated in a large range from -40% to 60% but the average sale price went down by 10% to 15% annually in the past three years.
As nature of massive production industry, highly sensitive gross margin to sales changes makes it very difficult for companies in this sector to keep its profitability. However, even though at the current unfavorable supply/demand situation, companies can still keep nearly 10% cash inflow/sales.
The average enterprise price/EBI ratio of this sector has been at around 10 (2017), a signal that the market is not seeing a bright future for sector in generating revenue, especially when we consider its 10% cash flow/ sale ratio.
